American Express to give back $85 million

Tuesday

Oct 2, 2012 at 12:01 AMOct 2, 2012 at 9:37 AM

American Express will re-imburse about 250,000 customers $85?million to resolve accusations that the company violated federal law in its marketing, billing and debt-collection practices, the company and the government said yesterday.

American Express will re-imburse about 250,000 customers $85?million to resolve accusations that the company violated federal law in its marketing, billing and debt-collection practices, the company and the government said yesterday.

The settlement is the latest in a series of enforcement actions against some of the nation’s largest financial institutions for problems in their credit-card businesses.

The investigation of American Express included the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Utah Department of Financial Institutions. They discovered problems in three American Express subsidiaries between 2003 and 2012 that ranged from the way the company advertised its cards to how it pursued customers behind on their bills.

The violations of consumer-protection laws started “from the moment a consumer shopped for a card to the moment the consumer got a phone call about long-overdue debt,” Richard Cordray, director of the consumer bureau, said in a statement.

To win customers for its “Blue Sky” credit-card program, the lender sometimes offered them a $300 reward, which never materialized, the regulators said. In providing credit, they said, American Express discriminated against applicants based on their age. The company also duped consumers into paying off stale credit-card debt with the promise of improving their credit score, the investigators said; in fact, regulators found, American Express was not reporting the payments to the credit bureaus.

American Express customers should expect refunds by March, regulators said. The company also agreed to pay $27.5 million in fines.

American Express said it had outlined plans to address each of the violations and “cooperated fully” with regulators.

The company must halt the deceptive practices and set up independent auditors to ensure that its practices comply with consumer-protection laws.

The fines and refunds will be paid, for the most part, from reserves, American Express said.